Bloomberg covers oral hearings on our motion for judgment in Transition tax case
By Aysha Bagchi
(Bloomberg Law) -- Oral arguments in a lawsuit challenging
the validity of rules implementing part of the 2017 tax overhaul
focused heavily on whether the plaintiffs are in the right
position to bring the challenge.
The questions were raised Monday during oral arguments at
the U.S. District Court for the District of Columbia, which has
been tasked with deciding whether Treasury violated multiple
statutes in the way it issued rules implementing tax code
Section 965‘s transition tax, passed through the 2017 law. The
tax treats otherwise-untaxed foreign earnings of U.S.
shareholders of certain foreign corporations as if the earnings
had been brought back to the U.S.
The case is among several legal battles tied to the 2017
Judge Amit P. Mehta asked whether the foreign corporation
that’s partly behind the lawsuit is actually subject to the
regulations, and wanted more clarity on the compliance
obligations for the corporation’s sole shareholder going
forward—signals that Mehta is wondering whether these are the
right kind of plaintiffs to be able to bring the case.
The case arose after U.S. citizen Monte Silver, who lives
and works in Israel, alleged that Treasury didn’t comply with
the Regulatory Flexibility Act, which requires federal agencies
to describe efforts to minimize any significant economic impact
on small entities or provide a certification—along with factual
support—that the rules won’t have that impact.
Silver also argued that Treasury didn’t abide by procedural
requirements spelled out in the Paperwork Reduction Act and the
Administrative Procedure Act.
Treasury has argued that it complied with both the RFA and
the PRA, including making a “reasonable and evidence-based
certification on economic impact.” It also said that Silver and
his business—which is a separate plaintiff in the case—don’t
have standing to bring the lawsuit because they don’t owe any
transition tax and “therefore have no future reporting
obligations under section 965 or the associated regulations.”
On Monday, Justice Department attorney Nishant Kumar argued
that Silver can’t bring his lawsuit because he doesn’t owe any
transition tax and isn’t subject to any reporting obligations
under Section 965 going forward.
Lawrence Marc Zell of Zell, Aron & Co., who represented
Silver and Monte Silver Ltd., argued that compliance costs
Silver already bore showed an actual injury had already occurred
that was a basis for him to bring his lawsuit.
The case is Silver v. IRS, D.D.C., No. 19-cv-0247, oral